News and Press Releases

Ten Defendants Indicted in Alleged $74 Million Vehicle Financing Fraud Scheme Resulting in $56 Million in Losses to Lenders

CHICAGO — A former area motorcycle and recreational vehicle dealer and his
accountant, together with eight other defendants who allegedly acted as straw buyers in sham
vehicle sales, were indicted on federal charges alleging a nearly $74 million fraudulent financing
scheme that resulted in approximately 20 lenders losing more than $56 million. All 10
defendants were charged with at least one count of bank fraud, and eight of them were also
charged with federal tax offenses, in a 36-count indictment that was returned by a federal grand
jury yesterday, federal law enforcement officials announced today.

The alleged bank fraud scheme involved two prongs: in one, the dealership fraudulently
obtained more than $31.3 million in direct financing through five lines of credit from Fifth Third
Bank, which lost more than $27.1 million; and, in the second, individual straw borrowers
obtained some 200 fraudulent loans totaling nearly $42.4 million, which resulted in some 18
financial institutions losing more than $29.5 million. At least 62 of these individual loans were
made to the eight defendants who allegedly acted as straw buyers.

The charges allege that all 10 defendants fraudulently obtained money for their personal
use and benefit, enabling them to maintain lavish lifestyles, operate various businesses, and/or
make investments. The money they obtained created the false appearance of personal wealth and
helped induce the lenders to advance funds more readily due to their misplaced confidence that
the defendants had sufficient personal wealth to repay the loans. The tax offenses against eight
of the defendants include one or more counts each of tax evasion, failing to file an income tax
return, or filing a false federal tax return.

Lead defendant RUSSELL S. OTT, 50, of Oswego, was the owner of Emily, Inc., which
did business as Pro Source Motorsports, which was last located in Morris, Ill. Between 1995 and
October 2008, Pro Source, the dealership at the center of the scheme, sold new and used
motorcycles, luxury motor homes, recreational vehicles, all terrain vehicles, boats and jet skis.
In 2007 and 2008, Ott also had ownership interests in Liberty Cycle in Libertyville, and Huntley
Chevrolet in Libertyville. Ott was charged with one count each of bank fraud and tax evasion.

Defendant BRIAN McMAHON, 54, of Naperville, was Ott and Emily, Inc.’s certified
public accountant, who also owned Triumph Suzuki in Naperville between 2001 and 2004 when
he sold it to Ott. McMahon was charged with one count of bank fraud and two counts of filing
false tax returns.

All 10 defendants will be ordered to appear for arraignment on dates to be determined in
U.S. District Court.

Direct Lending Fraud

According to the indictment, Ott and McMahon fabricated false personal and business tax
documents and financial statements and provided them to Fifth Third Bank, which between May
2007 and October 2008, extended Pro Source approximately $31,368,457 through five different
credit lines, which funded traditional “floor plan loans.” As part of the scheme, Ott faxed false
flooring requests with fictitious vehicle identification numbers for non-existent recreational
vehicles, or real VINs for actual RVs but with dramatically inflated values. Ott sometimes
“double floored” vehicles by obtaining separate financing from Fifth Third and a different lender
for the same vehicle.

Straw Borrower Fraud

According to the indictment, Ott enlisted the other eight defendants as straw borrowers so
they could obtain fraudulent loan proceeds to share with Ott even though they did not actually
purchase the vehicles – usually very expensive RVs – for which the loans were made and the
vehicles generally did not exist. The lenders who financed these loans generally deposited the
funds into Emily, Inc.’s bank account, and then Ott periodically disbursed the proceeds to straw
borrowers to operate and support their own businesses and lifestyles, make investments, and
make monthly payments on some of the loans to perpetuate the scheme.

Ott allegedly made personal use of the fraudulently obtained funds to operate Pro Source,
which operated at a loss from approximately 2001 through 2008; and to make the following
purchases – a house in Elburn for approximately $679,491 and make subsequent improvements
which increased the home’s cost to more than $1.1 million; a $258,000 vacation home in
Butternut, Wis.; a $350,000 rental home in South Elgin; a Sky Hawk 172 Cessna airplane and
hanger for approximately $200,000; and pick-up trucks and other vehicles for family members
and employees of Pro Source. He also used the money to invest in and purchase other vehicle
dealerships, including more than $3.6 million in Huntley Chevrolet, and more than $1 million in
Liberty Cycle.

The other eight defendants, who allegedly acted as straw buyers, and details of their
charges and alleged personal use of the funds are as follows:

ANDREW W. STACY, 51, of Elburn, a parts manager at Pro Source between 1998 and
2000. In late 2005, with financial assistant from Ott, Stacy acquired TUF Powersports, a
motorcycle dealership in DeKalb, which he operated until it closed in late 2008. Stacy acted as a
straw borrower on six fraudulent loans totaling more than $2.5 million, and after making certain
periodic payments, used a portion of the funds to operate TUF Powersports and for personal
expenses;

SCOTT F. DARVILLE, 48, of Racine, Wis., who owned and operated Pro Source of
Woodstock, in 1998 and 1999. In 2000, DARVILLE became the owner of Racine MotorSports,
Ltd., a motorcycle dealership he operated until it closed in 2009. Darville acted as a straw
borrower on nine fraudulent loans totaling nearly $2.5 million, and after making certain periodic
payments, retained more than $2 million, which he used to operate Racine Motorsports and for
personal expenses;

F. PETER MIGNIN, 63, of Geneva, who owned and operated Northwest Investment
Company, Inc., which formerly did business as Schaumburg Honda, a new and used motorcycle
dealership. Mignin also owned RPM Management, LLC, doing business as Liberty Cycle, which
he agreed to sell to Ott in 2007, and Mignin held an ownership interest with Ott in 2007 and
2008 in Huntley Chevrolet. Mignin acted as a straw borrower on 10 fraudulent loans totaling
more than $3.8 million, and after making certain periodic payments, retained more than $3.4
million, which he used to operate Schaumburg Honda, Liberty Cycle, and for personal
investments and expenses, including $450,000 toward the construction of his home, residence,
and an $863,000 investment in Huntley Chevrolet;

KEVIN D. HANSON, 43, of Louisville, Ky., and formerly of Chicago, who owned and
operated Safety First Racing, LLC, of Arlington Heights, a professional motorcycle racing team
that competed at events throughout the United States between 2003 and 2008. Hanson acted as a
straw borrower on seven fraudulent loans totaling more than $2.8 million, and after making
certain periodic payments, retained more than $2.4 million, which he used to operate Safety First
Racing, and for personal expenses;

OWEN A. WEICHEL, 48, of Huntington Beach, Calif., a former professional motorcycle
racer who owned and operated Center of Gravity, LLC, which imported motorcycle parts from
Japan and resold them in the United States. Weichel acted as a straw borrower on five fraudulent
loans totaling more than $2.1 million, and after making certain periodic payments, retained more
than $1.9 million, which he used to operate Center of Gravity and for personal expenses,
including foreign investments in Costa Rica, Italy, and Canada of approximately $1,261,200;

JOHN MATERYN, 50, of Ypsilanti, Mich., who worked for Ott at Pro Source in 1998
and later at Liberty Cycle. Materyn acted as a straw borrower on seven fraudulent loans totaling
more than $2.3 million, and after making certain periodic payments, he used a portion of the
funds to operate Pro Source Motorsports in Michigan and for personal expenses;

JILL A. PLUTA, 55, of LaPorte, Ind., Ott’s former sister-in-law who was formerly
known as Jill Ott, and who worked at Pro Source in 2005. She acted as a straw borrower on five
fraudulent loans totaling nearly $1 million, and after making certain periodic payments, retained
approximately $680,334, which she used for personal expenses; and

JOAN M. QUICK, 52, of Walworth, Wis., the office manager for Pro Source who was
responsible for Pro Source’s day-to-day bookkeeping and accounting. Quick acted as a straw
borrower on seven fraudulent loans, and she later wrote checks and directed electronic transfers
from Emily, Inc. accounts totaling more than $1 million, which she used for personal expenses,
including her residence, automobiles for at least three of her children and college tuition for at
least two of them, and credit card payments totaling approximately $550,125.

The charges were announced by Gary S. Shapiro, United States Attorney for the Northern
District of Illinois; Robert J. Shields, Jr., Acting Special Agent-in-Charge of the Chicago Office
of the Federal Bureau of Investigation; and James C. Lee, Special Agent-in-Charge of the
Internal Revenue Service Criminal Investigation Division in Chicago.

The government is being represented by Assistant U.S. Attorney William Hogan.

Each count of bank fraud carries a maximum penalty of 30 years in prison and a $1
million fine, or an alternative fine totaling twice the gross gain or twice the loss, whichever is
greater, and restitution is mandatory. Tax evasion carries a maximum penalty of five years in
prison and filing a false tax return carries a maximum of three years in prison, and both carry a
maximum fine of $250,000, while failure to file a tax return carries a maximum of a year in
prison and a $100,000 fine. In addition, defendants convicted of tax offenses face mandatory
costs of prosecution and remain civilly liable to the government for any and all back taxes, as
well as a potential civil fraud penalty of up to 75 percent of the underpayment plus interest. If
convicted, the Court must determine a reasonable sentence to be imposed under federal statutes
and the advisory United States Sentencing Guidelines.

The public is reminded that an indictment contains only charges and is not evidence of
guilt. The defendants are presumed innocent and are entitled to a fair trial at which the
government has the burden of proving guilt beyond a reasonable doubt against each defendant.